Fund of Information

New Study on Old Controversy

When hedge-fund favoritism hurts mutual-fund returns.

PLENTY OF ASSET MANAGERS OPERATE mutual funds and hedge funds under the same roof. But some of those mutual funds could be getting the short end of the stick. That's because certain managers appear to favor hedge funds over mutual funds when it comes to allocating trades and IPOs, a research paper concludes.

"All of the evidence is consistent with favoritism," says one of the working paper's authors, Scott Gibson, a...